Screening Equities with High Amplitude, Persistent ROE, and Moderate Concentration

Summary

This Chinese-language note outlines an equity selection screen combining price amplitude, return on equity, and a concentration measure. The initial rule calls for amplitude above one, ROE above 15% for five consecutive years, and concentration below 20%. Its discussion then proposes refining the concentration range to between 20% and 70%, adding a lower-volatility condition, and assessing profitability and market position with additional measures. Example formulas are included, but some conditions are placeholders rather than fully specified calculations.

The note identifies several limitations: holdings-based concentration data may be inaccurate, an amplitude filter can favor more volatile stocks, and a fixed ROE threshold may fail to account for industry differences or cyclical businesses. Suggested refinements include other volatility and operating indicators, broader ROE assessment, and industry-aware thresholds. The material provides no backtest results or evidence that the screen produces excess returns. Its alternative formulas also do not cleanly resolve the initial rule: the example combines multiple ROE checks and changes the concentration condition, so implementation details require verification before use.

Key ideas

• The initial screen combines price amplitude, five years of strong ROE, and a concentration threshold.
• The discussion later proposes a concentration range and additional volatility and business quality filters.
• The note warns that amplitude can increase portfolio volatility.
• A fixed ROE cutoff may not suit cyclical firms or every industry.
• The example formulas leave some conditions underspecified and provide no performance evidence.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.